scispace - formally typeset
Search or ask a question
Posted Content

Investigating the Relationship between Institutional Ownership and Audit Fees

01 Jan 2014-Vol. 2, Iss: 1, pp 27-33
TL;DR: In this paper, the authors investigated the relationship between institutional ownership and audit fees in 50 firms listed in Tehran Stack Exchange and found that there is no meaningful relationship between the two factors.
Abstract: Institutional owners possess a large portion of the company stocks. Regarding the separation of the ownership from the management in a firm, the pivotal role of these owners in controlling and monitoring the management of the firms becomes more prominent. Since, audit fees is an important issue both for the managers and independent auditors, so this study aims at investigating the relationship between institutional ownership and audit fees in 50 firms listed in Tehran Stack Exchange. Time span for this study has been specified between 2008 to 2012. The analysis of the data is carried out by using Eviews software. At the end, it was found that there is no a meaningful relationship between institutional ownership and audit fees..
Citations
More filters
Journal ArticleDOI
03 Apr 2019
TL;DR: In this article, the authors evaluate the effect between audit quality and risk taking on value creation and find that only tenure and ownership concentration have a significant effect on the value creation of companies.
Abstract: The purpose of this paper is to evaluate the effect between audit quality and risk taking on value creation.,Population under study is companies on the Jakarta Stock Exchange from 2004 to 2015. Considering the limitations, 145 companies studied in this research, which made a sample containing 1,740 company-years. This study is based on the panel data and multivariate regression method. This research uses fixed and random effects to estimate the regression. In this paper, five components of audit quality, including auditor specialization, tenure, audit firm size, ownership concentration and the percentage of unbounded members of the board, are studied.,The results of this study indicate that among these five components as well as the risk factor, only tenure and ownership concentration have a significant effect on value creation of companies. In other words, both ownership concentration and tenure are positively effective in value creation and other variables have no significant effect on value creation. Besides, none of them could affect the risk taking on value creation.,The outcomes of the current study help audit market and capital market in developing nations.

7 citations

References
More filters
Journal ArticleDOI
TL;DR: In this article, the authors examine the relationship between board characteristics and external audit fees for Fortune 1000 companies and find significant positive relationships between board independence, diligence, and expertise and audit fees.
Abstract: This paper examines the relationship between board characteristics and external audit fees for Fortune 1000 companies. Competing arguments exist regarding the possible relationship between board characteristics and fees. One view is that a more independent, diligent, and expert board would be more concerned with effectively discharging its monitoring role and would be more supportive of the external audit function. Such a board would be likely to insist on enhanced audit scope, thus increasing the audit fee. An alternative view is that a more independent, diligent, and expert board would reduce the auditor's assessment of control risk and would substitute some of its own monitoring for the monitoring of the auditor. This would reduce audit effort, thus decreasing the audit fee. Consistent with the first view, we find significant positive relationships between board independence, diligence, and expertise and audit fees. A more independent, diligent, and expert board does not appear to substitute for audit effort; rather, such a board may complement auditor oversight. These results add to the growing body of literature documenting a relationship between corporate governance mechanisms and various facets of the financial reporting and audit processes. In addition, the results add to our understanding of the determinants of audit fees.

816 citations

Journal ArticleDOI
TL;DR: In this article, the authors examine the relation between board characteristics (independence, diligence, and expertise) and Big 6 audit fees for Fortune 1000 companies and find significant positive relations between audit fees and board independence, diligence and expertise.
Abstract: This paper examines the relations between three board characteristics (independence, diligence, and expertise) and Big 6 audit fees for Fortune 1000 companies. To protect its reputation capital, avoid legal liability, and promote shareholder interests, a more independent, diligent, and expert board may demand differentially higher audit quality (greater assurance, which requires more audit work) than the Big 6 audit firms normally provide. The audit fee increases as the auditor's additional costs are passed on to the client, such that we expect positive relations between audit fees and the board characteristics examined. We find significant positive relations between audit fees and board independence, diligence, and expertise. The results persist when similar measures of audit committee “quality” are included in the model. The results add to the growing body of literature documenting relations between corporate governance mechanisms and various facets of the financial reporting and audit processes, as well as to our understanding of the determinants of audit fees.

764 citations

Book
01 Jan 2004
TL;DR: The Combined Code on Corporate Governance (CCG) as discussed by the authors is an international standard for corporate governance, and it has been used to define corporate governance frameworks and mechanisms, as well as a reference dictionary of corporate governance systems.
Abstract: Preface. Acknowledgements. Introduction. Part I Corporate governance: frameworks and mechanisms. 1 Defining corporate governance. 2 Corporate governance failure. 3 Corporate governance reform in the UK. 4 The role of boards in corporate governance. 5 The role of institutional investors in corporate governance. 6 The role of transparency, internal control and risk management in corporate governance. Part II Global corporate governance. 7 An introduction to corporate governance systems worldwide. 8 A reference dictionary of corporate governance systems. Part III Corporate governance and stakeholder accountability. 9 Discharging a broader corporate accountability. 10 Environmental, social and governance considerations in institutional investment. Appendix A The Combined Code on Corporate Governance (July 2003). Appendix B The OECD Principles of Corporate Governance. References. Index.

697 citations

Journal ArticleDOI
TL;DR: In this article, a multidimensional method of measuring earnings quality using the Financial Accounting Standards Board's (FASB) conceptual framework as a basis was developed to provide insights into the monitoring role of institutional investors by examining whether institutional ownership affects the quality of reported earnings.

305 citations

Journal ArticleDOI
TL;DR: In this article, the authors examined the empirical relationship between ownership characteristics and audit fees and found evidence of a significantly positive relationship between diffused institutional stock ownership (i.e., having less than 5% individual shareholding) and audit fee.
Abstract: The present study examines the empirical relationship between ownership characteristics and audit fees. The basic premise is that the level of ownership sophistication and the extent to which ownership is large and substantial impact the effectiveness of stockholder monitoring on corporate affairs including the financial reporting process. Furthermore, high managerial ownership firms may experience a decline in agency problems in financial reporting due to a decrease in managerial propensity to misreport financial results. By employing a cross-sectional least squares regression analysis for a sample of 358 New York Stock Exchange-listed firms audited by the Big Five auditors, we find evidence of a significantly positive relationship between diffused institutional stock ownership (i.e., having less than 5% individual shareholding) and audit fees, and a significantly negative relationship between institutional blockholder ownership (i.e., having 5% or more individual shareholding) and audit fees. Finally, we document that managerial stock ownership is negatively associated with audit fees. We do not, however, find evidence of any relationship between noninstitutional blockholder ownership (with at least 5% individual stock ownership) and audit fees. The study's main results hold in various specification tests including when the effects of board-related and audit committee variables are factored in the analysis. Based on the observed relationship between the ownership variables and audit fees, we suggest that the ownership characteristics of a firm as a part of its governance mechanism constitute an important determinant of audit fees.

198 citations